Pennsylvania Sues NCAA Over ‘Illegal’ $60 Million Fine

Pennsylvania Governor Tom Corbett sued the National Collegiate Athletic Association, challenging a $60 million fine levied against Pennsylvania State University for its role in the Jerry Sandusky sex-abuse scandal.

The NCAA sanction violates antitrust law by restraining competition in the markets for college sports and enrollment, according to a complaint filed today in federal court in Harrisburg. The NCAA used Sandusky’s offenses as a “pretext” to impose unprecedented penalties, the state said.

Penn State President Rodney Erickson was forced by the NCAA “to agree to the sanctions under the threat of a death penalty” to its football program, Corbett said today at a press conference near the university in State College, Pennsylvania.

“The NCAA leadership can’t make up its own rules,” the governor said. “A handful of top NCAA officials simply inserted themselves into an issue they had no authority to police.”

Penn State was sanctioned by the NCAA in July and fined $60 million for its failure to prevent the sexual abuse by Sandusky, who was convicted of molesting 10 boys over 15 years when he was a football coach. The 68-year-old Sandusky, an assistant coach for 31 years under Joe Paterno, was sentenced in October to a minimum of 30 years in prison.

In addition to the fine, the Indianapolis-based NCAA, the governing body for college sports, stripped Penn State of 112 football wins from 1998 through 2011 and barred the Nittany Lions from bowl games for four years, matching the longest post- season ban in NCAA history.

NCAA Attorney

NCAA General Counsel Donald Remy called Corbett’s announcement a setback to the university’s efforts to move forward.

“Not only does this forthcoming lawsuit appear to be without merit, it is an affront to all of the victims in this tragedy,” Remy said in a statement.

Penn State said in a statement that it’s “committed to full compliance with the consent decree.”

Corbett said in July that he was grateful that the NCAA didn’t impose a so-called death penalty shutting down the football program. He said he sought assurance from Penn State that no taxpayer dollars would be used to pay the fine.

“The NCAA had no authority to operate outside of their own bylaws,” Corbett said today. This is a criminal matter, not a violation of NCAA rules.’’

Penn State said in August that it would pay in five annual installments of $12 million out of football reserves, the deferring of capital and maintenance expenditures and an internal Athletic Department loan.

Likely Arguments

Corbett’s claims make for a difficult argument and one that the NCAA is probably prepared to argue against, said Michael McCann, director of Vermont Law School’s Sports Law Institute.

“The NCAA is going to say we have a contractual relationship with Penn State and Penn State accepted these sanctions,” McCann said. “Penn State missed an opportunity to challenge this when they signed the consent decree. They contractually relinquished their rights.”

The NCAA sanctions required the payment to be made over five years into a special fund for child-abuse prevention programs.

James Schultz, Pennsylvania’s general counsel, said the state has a strong case and will seek “an injunction of the entire litany of sanctions.”

“The NCAA didn’t have any business in this,” Schultz said at the press conference.

Sports Money

In the fiscal year ended in 2011, Penn State’s athletic department generated $116.1 million in operating revenue and posted a $14.8 million operating profit, according to school records. The football team had an operating profit of $43.8 million on $58.9 million in revenue.

The NCAA acted against the school less than two weeks after an investigation found that Paterno, who died of lung cancer in January 2012, and other school officials tried to cover up abuse allegations. Paterno wasn’t charged with any crime.

The $6.5 million internal investigation commissioned by the university and led by Louis Freeh, a former director of the Federal Bureau of Investigation, found that school officials ignored red flags involving Sandusky for more than a decade.

Freeh’s report faulted the “culture of reverence” surrounding Penn State’s football program for leading to the Sandusky scandal.

Former Penn State President Graham Spanier and two other school officials face criminal charges tied to a 2001 abuse allegation against Sandusky. A trial set for January in state court in Harrisburg has been delayed indefinitely.

Paterno Family

Paterno’s family hasn’t reviewed the suit and declined to comment on any specifics, Mara Vandlik, a spokeswoman for the family with McGinn & Co., said in a statement.

“The fact that Governor Corbett now realizes, as do many others, that there was an inexcusable rush to judgment is encouraging,” the family said in the statement.

Corbett, a Republican, said at the news conference that the state in the suit will ask a judge to declare the consent agreement illegal. Penn State President Rodney Erickson reluctantly entered into the accord under the threat of a death penalty, Corbett said.

‘Real Prosecutors’

“It’s interesting that a former prosecutor would raise that concern because real prosecutors do that to defendants all the time,” said Wes Oliver, a Duquesne University law professor. “That’s exactly what every plea bargain in America looks like.”

“If Tom Corbett has an objection to the decree it should have been at the time it was entered,” Oliver said in a phone interview.

State Senator Jake Corman, also a Republican, said after the press conference today that he plans to introduce legislation to address how the $60 million fine is spent. In a Dec. 28 letter to legislators, Corman said he wants to direct funds from penalties placed on Commonwealth supported schools to causes within the state.

‘Terrible Situation’

“Penn State University was put in a terrible situation,” Corman said. “They can’t bring this lawsuit. That’s why we’re here. It could be argued as to whether they should have signed the consent decree or not, but we just have to go forward.”

Corbett said he conferred with outgoing state Attorney General Linda Kelly before deciding to bring the suit. He hasn’t yet spoken to incoming Attorney General Kathleen Kane.

Kane, a Democrat, called for an investigation of the handling of the Sandusky probe during her campaign.

Prosecutors began looking into Sandusky in early 2009 under then-Attorney General Corbett, who was elected governor in 2010. Sandusky wasn’t charged until November 2011, almost three years after the probe began.

For Corbett’s antitrust claim to be successful he would have to prove that the NCAA’s purpose was to give an advantage to every member school at Penn State’s expense, Oliver said.

“It will fail miserably because it puts him now in conflict with the university which accepted the sanctions,” Oliver said. “I can’t come up with any reason why this makes sense.”

The case is Corbett v. National Collegiate Athletic Association, 13-cv-6, U.S. District Court, Middle District of Pennsylvania (Harrisburg).

To contact the reporters on this story: Sophia Pearson in Philadelphia at spearson3@bloomberg.net; Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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